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Financial Management

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Why did ICBC feel it was necessary to issue equity in markets outside of China? What are the advantages of such a move? Can you see any disadvantages?

What was the attraction of the ICBC listing to foreign investors? What do you think are the risks for a foreigner associated with investing in ICBC?

This question comes from MBA Study out of Hill, C. (2011). International business: competing in the global marketplace. New York: McGraw Hill

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The response addresses the queries posted in 438 words with references.

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The response addresses the queries posted in 626 words with references.

// China's biggest bank, Industrial and Commercial Bank of China raised $21.94 billion by its world's biggest initial public offering in October, 2006. In this article, firstly, we will analyse the pros and cons of ICBC decision to issue equity to the investors outside China. Then, we will discuss the attraction of ICBC listing to foreigners and analyse the risks associated.//

In October 2006, ICBC, China's biggest bank had a historic dual listing on two stock exchanges, i.e. shares on Shanghai stock exchange and H shares on Hong Kong stock exchange, which was mainly for the foreign institutional investors. Due to oversubscription of IPO, ICBC had to exercise greenshoe option, which enabled it to sell up to 14.95 billion. A share and $0.70 billion H shares, which forms almost 16.7% of its total share capital. ICBC decides to issue equity shares to foreign investors to make this mega IPO a big success. It was the only way to improve its capital strength, capital adequacy, profitability and ...

Solution provided by:
Ashish Sharma, MBA (IP)
Education
  • MBA (IP), International Center for Internationa Business
  • BBA, University of Rajasthan
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